Record high remittances to low- and middle-income countries in 2017

The World Bank’s latest Migration and Development Brief shows that officially recorded remittances to developing countries touched a new record—$466 billion in 2017, up 8.5 percent over 2016. The countries that saw the highest inflow in remittances were India with $69 billion, followed by China ($64 billion), the Philippines ($33 billion), Mexico ($31 billion), Nigeria ($22 billion), and Egypt ($20 billion). Remittance flows to developing countries are expected to grow 4.1 percent to reach $485 billion in 2018.

The overall recovery in remittances is better than we expected. It is driven by stronger growth in the European Union, the Russian Federation, and the United States. The rebound in remittances, when valued in U.S. dollars, was helped by higher oil prices and a strengthening of the euro and ruble.

The global average cost of sending $200 was 7.1 percent in the first quarter of 2018. The cost ranges from the most expensive average cost of 9.4 percent in Sub-Saharan Africa, to the lowest average cost of 5.2 percent in South Asia. The average cost is higher than the Sustainable Development Goal target of 3 percent in all regions.

De-risking by banks continues to reduce correspondent banking access for money transfer operators. Stringent know-your-client regulations on small remittances continue to keep for remitting high. They constrain the introduction of cheaper and more efficient technologies—such as internet and smartphone apps and the use of cryptocurrency and blockchain—in remittance services. Other barriers to lowering remittances costs are exclusivity contracts between national post office systems and money transfer operators, which hinder market competition.

In 2017, the stock of international migrants worldwide is estimated to be 266 million, including 24 million refugees. While the United States remains the largest destination for migrants, the share of foreign workers in population is significantly higher (near or over 80 percent) in the UAE, Kuwait and Qatar.

The Global Compact on Migration (GCM) – a global agreement being negotiated by over 200 countries – is a welcome process to promote safe, orderly and regular migration. It sets out 22 objectives covering almost all major migration issues including the targets set out in the Sustainable Development Goals. However, it’d be stronger if it addressed a number of challenges to non-migrants, including maintaining national identity in the face of large immigration flows, perceived (and actual) job competition impacting native workers in host countries, and the difficulties faced by family members of migrants who are left behind in the country of origin. Also, financing migration programs remains a challenge. Conditionalities on aid, trade and investments, implied in the draft GCM, may not prove effective.

Currently under negotiation for final adoption in December 2018, the global compact proposes three International Migration Review Forums in 2022, 2026 and 2030. The World Bank Group and KNOMAD stand ready to contribute to the implementation of the global compact.

In a special feature, the Brief notes that transit migration involves more risks than direct migration from an origin country to a destination country. The main drivers of transit migration are the same as those of direct migration. Migrants transit through third countries because direct passage to the final destination is not possible. The transit country is chosen because of the relative ease of obtaining passage via “document shopping,” or smugglers.

Transit migrants may escape poverty or persecution, but many also become vulnerable to exploitation by human smugglers during the transit. They do not send remittances; instead, some may receive money from home to pay for the high costs of transit. Transit countries may find their own poor population competing with the new-comers for low-skill jobs.

Policy responses to address transit migration includes creating economic opportunities and reducing fragility in origin countries. Opening more legal channels for migration to destination countries would help. On the other hand, criminalization of transit migrants may prolong their stay. Collaboration among origin, transit, and destination country to address transit migration should avoid possible disruptions to free regional mobility that has existed historically, or to free mobility under existing regional protocols.

In the minimum, the human rights of transit migrants should be respected. Origin countries need to empower embassies in transit countries to assist transit migrants. Multilateral agencies can help by providing data, technical assistance and financing solutions to manage transit migration.

The Migration and Development Brief and the latest migration and remittances data are available at www.knomad.org.